As part of the Affordable Care Act, Congress outlined the process for providers to return Medicare and Medicaid overpayments. In 2012, CMS proposed the 60-day Refund Rule, as it is commonly known, requiring Medicare providers and suppliers to report and return reimbursements made in error within 60 days of their identification. While the proposed rule does not address Medicaid overpayments, CMS noted that it intended to address the process of collecting Medicaid overpayments at a later date; however, some states have implemented local policies addressing this issue (See, e.g., Texas Regulation).
The statute defines an overpayment as any funds received by a health care entity that are in excess of amounts to be paid under Medicare statutes and regulations. Overpayments may be attributed to various operational and payment errors, including non-covered services, duplication and eligibility issues.
Identifying overpayments is the critical component of the 60-day Refund Rule. Uncertainty still exists regarding when an overpayment has been identified and when the 60-day “clock” begins.
According to the proposed rule, an overpayment is considered “identified” when a person has actual knowledge of the overpayment or acts in “reckless disregard or deliberate ignorance” of the existence of the overpayment. To encourage provider self-compliance, CMS used the “reckless disregard or deliberate ignorance” standard from the False Claims Act. However, the statute does not mandate this interpretation.
The preamble of the proposed rule seems to indicate that CMS intended that the 60-day clock start after there has been an opportunity to complete a “reasonable inquiry.” A “reasonable inquiry” likely refers to the investigation period following the receipt of information regarding the overpayment. Although the rule does not define “reasonable inquiry,” it is rational to assume that the scope of the investigation will depend on the type of issue under consideration.
Process for Reporting Overpayments
Routine overpayments may be reported using the overpayment procedures defined by CMS carriers. For overpayments requiring an OIG self-disclosure, reporting is done through the OIG Provider Self-Disclosure Protocol.
For Stark Law issues, CMS proposed that a self-report of an overpayment along with a separate CMS Self-Referral Disclosure Protocol must be submitted, including the following information:
- How the error was discovered
- Scope of the problem
- Cause of the error leading to overpayment
- Comprehensive corrective action plan, including systemic solutions
Look-Back Period for Reporting Overpayments
Significantly, CMS proposes to require that an overpayment be returned and reported if identified within 10 years of the date the overpayment was received. Currently, regulations permit the disclosing party to look back only four years for simple Medicare overpayments. This proposed look back period may impose a significant administrative burden on providers.
Preparing for an Inquiry
Thorough preparation is essential for an efficient inquiry and repayment. Utilizing a standard inquiry process can help facilitate a seamless payment refund and help avoid unnecessary penalties.
Prior to opening an inquiry, it is important to determine whether the investigation should be conducted under attorney-client privilege or attorney work product. This process should include:
- A standard form to document all allegations
- Systematic methodology and an investigation plan
- Clearly defined corrective actions to address root causes and prevent future occurrences
Preventing Future Errors
In light of the dramatic changes in the proposed rule, it is critical to fortify processes to both identify past overpayments and prevent future errors. The initial step is to implement or update existing identification policies and procedures for reporting and refunding identified overpayments within 60 days. Once a plan is in place, the following measures will help strengthen the overpayment identification process and modify areas of operation prone to error:
- Periodically audit and monitor timeliness, accuracy and completeness of reporting and refunding identified overpayments;
- Obtain validation that overpayments were correctly reported and refunded or recouped;
- Follow up on corrective action plans and systemic solutions; and
- Implement training and education for all entities involved.
Complying with the 60-day Refund Rule adds complexity to provider processes and procedures, and failure to comply with this rule may expose an organization to an unacceptable level of risk.